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Date: 4 January 2021

Author: Chris Wright

Stamp Duty Holiday – How it Works?

It’s January, the start of another year, unusual as it might be already, it is still ripe with opportunities. Yet as Britain heads into another full-scale lockdown, we’re in a very different position property-wise to that of this time last year.


So far, the government has maintained that the 31 March 2021 will be the official end of the Stamp Duty Land Tax (SDLT) holiday, with no plans to extend it at this time. There are though loud calls from within the property industry for the SDLT holiday to be extended for a further six months. Whether the government listens will remain to be seen, but it’s clear that there’s an ever-increasing pressure on lenders, surveyors, conveyancers, and estate agents to complete purchases within the little time there is left.

Stamp Duty Holiday – How does it work? 

As you may recall, going back to July 2020, the government announced that it would raise the threshold for paying stamp duty on property purchases from £125,000 to £500,000 in England and Northern Ireland. The SDLT holiday thus means that buyers of homes of up to a value of £500,000 pay no stamp duty, with a reduced rate for homes above that. So for example, someone buying a £500,000 property who achieve a saving of £15,000.

The SDLT holiday is also open to landlords and investors, although they do still have to pay the standard 3% surcharge for a second home purchase.

What effects have you seen from the Stamp Duty Holiday? 

When chancellor Rishi Sunak made the announcement on the SDLT holiday back in July, it was at a time of huge economic uncertainty as a result of the COVID pandemic starting to take its toll. What the SDLT holiday has achieved is to help fuel a mini-boom in the property market.

As a property lender, we at MSP Capital have certainly bore witness to a rise in sales volumes on completed development stock over Q3 and Q4 of 2020. This would appear to have been primarily driven from those house buyers looking to move to homes with gardens after perhaps being stuck in a flat with either no or very limited outside space during lockdown. Given many development sites were severely delayed during the first lockdown, and many development loans needed to be extended to account for these delays, the fact that demand is strong and sales are completing quickly, has certainly been a positive outcome.

There are some within the property industry that wish to raise caution to those desperate to complete their purchase before the deadline on the 31st March. It has been noted that the average residential property price has increased by more than £15,000 since June 2020, thus outweighing the savings available with the SDLT holiday. Indeed, some feel that housing market activity is likely to slow down this year, especially once the SDLT holiday expires. If this is the case, and there is a house price correction, we may find the SDLT ‘savings’ are wiped away if property prices do drop as some fear.

Homebuyers who do though want to take advantage of the SDLT holiday are being encouraged to act quickly, as there are those that are warning that the current high demand for mortgages, coupled with the COVID restrictions we are still facing, are creating delays in the buying process. So with buyers desperate to complete on purchases before 31 March, perhaps bridging finance could become an option to some.

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